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European Tourism in 2016: Trends & Prospects (Q1/2016)

EUROPEAN TOURISM 2016 TRENDS & PROSPECTS

APRIL 2016


1

EUROPEAN TOURISM IN 2016: TRENDS & PROSPECTS

Quarterly Report (Q1/2016)

A quarterly insights report produced for the Market Intelligence Group

of the European Travel Commission (ETC)

by Tourism Economics (an Oxford Economics Company)

Brussels, April 2016

ETC Market Intelligence Report


2

Copyright © 2016 European Travel Commission


All rights reserved. The contents of this report may be quoted, provided the source is given accurately

and clearly. Distribution or reproduction in full is permitted for own or internal use only. While we

encourage distribution via publicly accessible websites, this should be done via a link to ETC's

corporate website, www.etc-corporate.org, referring visitors to the Research/Trends Watch section.

The designations employed and the presentation of material in this publication do not imply the

expression of any opinions whatsoever on the part of the Executive Unit of the European Travel

Commission.

Data sources: This report includes data from the TourMIS database (http://www.tourmis.info), STR

Global, IATA, AEA and UNWTO.

Economic analysis and forecasts are provided by Tourism Economics and are for interpretation by

users according to their needs.

Published and printed by the European Travel Commission

Rue du Marché aux Herbes, 61, 1000 Brussels, Belgium

Website: www.etc-corporate.org

Email: [email protected]

ISSN No: 2034-9297

This report was compiled and edited by:

Tourism Economics (an Oxford Economics Company)

on behalf of the ETC Market Intelligence Group

Cover: Banque et Caisse d'Epargne de l'Etat Clock Tower, ID da Image: 212390323

Copyright Sergey Novikov

In memoriam Mr Tom Ylkänen

http://www.tourmis.info/index_e.html

http://www.etc-corporate.org/

mailto:[email protected]


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TABLE OF CONTENTS Foreword .............................................................................................................. 4

1. Tourism Performance Summary 2016 ............................................................. 8

2. Tourism Performance Summary 2015 ........................................................... 11

3. Global Tourism Forecast Summary ............................................................... 13

4. Recent Industry Performance ........................................................................ 14

4.1 Air Transport ........................................................................................... 14

4.2 Accommodation ...................................................................................... 18

5. Special Feature .............................................................................................. 19

6. Key Source Market Performance ................................................................... 21

6.1 Key Intra-European Markets ................................................................... 21

6.2 Non-European Markets ........................................................................... 25

7. Origin Market Share Analysis......................................................................... 28

7.1 United States ........................................................................................... 29

7.2 Canada .................................................................................................... 30

7.3 Mexico ..................................................................................................... 31

7.4 Argentina ................................................................................................. 32

7.5 Brazil ....................................................................................................... 33

7.6 India ........................................................................................................ 34

7.7 China ....................................................................................................... 35

7.8 Japan ...................................................................................................... 36

7.9 United Arab Emirates .............................................................................. 37

7.10 Russia ................................................................................................... 38

8. Economic Outlook .......................................................................................... 39

8.1 Overview ................................................................................................. 39

8.2 Eurozone ................................................................................................. 42

8.3 United Kingdom....................................................................................... 43

8.4 United States ........................................................................................... 44

8.5 Japan ...................................................................................................... 45

8.6 Emerging Markets ................................................................................... 46

9. Appendix 1 ..................................................................................................... 50

10. Appendix 2 ................................................................................................... 52


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FOREWORD

POSITIVE START INTO 2016 UNDER THE CLOUDS OF UNCERTAINTY

An outstanding tourism performance in Europe in 2015 augurs well for

continued growth into 2016 following the 5% increase in international tourist

arrivals recorded last year. According to the World Tourism Organization

(UNWTO) European Tourism has been fluctuating over the past number of

years, yet remaining firm on the path of growth since the pre-crisis period1.

Based on data reported so far, European tourism gets off to a good start in

2016. Nevertheless, safety and security concerns and recent developments in

passport-free travel are at risk of hampering the region’s tourism growth.

Despite the on-going economic recovery of the Eurozone, reduced oil prices

and favourable exchange rates spurring travel to and from the region, the

impact of unfortunate events call for closer monitoring to assess the weight on

travel in the long term.

INTRA-REGIONAL MARKETS – KEY DRIVERS OF THE REGION’S

GROWTH

Almost all monitored destinations saw robust results in both overnights and

arrivals over January-February 20162, however, figures are expected to

moderate as the year progresses. Among the top performers worldwide, strong

growth was posted by Spain (+12.5%) – reflecting their efforts to fight

seasonality – followed by Austria and Germany (both +5%). In line with the past

year’s trend, Turkey (-8.5%) saw arrivals from its key source markets dampen

largely due to on-going political and safety challenges.

1 UNWTO (2015), World Tourism Barometer, Vol. 13, January 2015.

2 Regularly updated data can be obtained from TourMIS (www.tourmis.info).

-6

-4

-2

0

2

4

6

8

2008 2009 2010 2011 2012 2013 2014 2015*

* Provisional figure Source: World Tourism Organisation (UNWTO)

% change year ago

International Tourist Arrivals to Europe

13 The number of

European destinations

reporting growth in 2016 to

date

16 destinations have

reported on tourism

performance in 2016

http://www.tourmis.info/


5

Despite recent industry strikes and some fluctuations, early results suggest the

airline industry remains aided by lower fuel costs and improving economic

indicators in the Eurozone. European airline passenger load factor rose to

82.6% so far in 2016, although this is a lower peak than that posted in previous

years. On the other hand, European airline capacity growth stabilised by mid-

Q1 to its average of 6.5%.

The European Commission’s Eurobarometer survey3 revealed that 50% of

survey respondents intend to go on holidays without changing their plans. The

proportion of those that see their travel plans influenced by the economic

situation are more inclined to adjust their travel plans accordingly: 10% will not

go on holidays at all, 33% will take a short trip (up to three consecutive nights),

and 17% will spend less.

3 European Commission (2016), Preferences of Europeans Towards Tourism, Flash Barometer 432.

70

72

74

76

78

80

82

84

86

88

90

Q1 Q2 Q3 Q4

2014

2015

2016

Source: AEA

Weekly load factor, %

European Airlines Passenger Load Factor

0

10

20

30

40

50

60

70

80

90

100

EU28 Germany UnitedKingdom

France Netherlands Italy

Not changing travel plans

Not going on holidays this year

Spending less

Take a short trip

Source: European Commission, Flash Eurobarometer 2016

% of total respondents

Preferences of Europeans Towards Tourism, 2016

83% Peak of European airline

passenger load factor in

2016

Based on data for Q1


6

GROWTH PROJECTION TO BE SUSTAINED BY LARGEST LONG HAUL

MARKETS4

European tourism continues to benefit from the recovering economies of key

source markets which exhibit moderate but sustained growth, with Germany,

the United Kingdom, and France remaining at the top. Germany leads in terms

of outbound volume and tourism expenditure stemming from strengthening

economic growth, a robust labour market and increased private consumption. A

similar scenario applies for the UK, owing to favourable exchange rates for

some destinations, increased consumer confidence, strong spending power

and tapering unemployment levels presumably contributing to a bump in travel

demand.

The US outbound market accounts for 5% of the share of international tourist

arrivals to Europe (25.7 million in 2015) and is expected to increase to 6.2% on

average towards 2020. This upward trend is encouraged by several factors:

appreciation of the US dollar stimulating outbound travel, price competitiveness

of European destinations, continued employment growth, rising disposable

income, and increased consumer spending. On the other hand, China remains

the second largest long haul source market for Europe, although accounting for

a shy 2% of the share of international tourist arrivals. Despite concerns of the

slowing Chinese economy and the implementation of the Biometric Visa system

hampering outbound travel, tourist flows from this market remain robust. For

Japan, rising real wages are expected to support consumer spending whereas

across the Atlantic a gloomy picture in outbound travel is expected for Brazil, as

the economy struggles to pull out of recession. Although performance from the

US and Chinese markets has been strong based on available figures, data

should be interpreted with extreme caution as the impact of recent terror

attacks in Europe have yet to be observed in the coming months.

Travel demand from the Russia will continue to follow a downward trend in

2016 with more than half of reporting destinations recording negative figures in

early 2016. On the bright side, with an economy in recession, the depreciation

of the rouble, and lower oil prices, economic trends seem to be levelling-off

recovering from a hard recession in the previous years.

“IN UNION THERE IS STRENGTH” – AESOP

Europe is par excellence the number one tourist destination worldwide, driven

by the sustained demand from mature intra-regional and emerging long haul

travel markets. Nevertheless, while Europe is also admired for its quality,

diversity and safety, legal (especially visa requirements) and perceptual

barriers continue to inhibit tourism flows. In order to remain competitive in the

sector and to foster sustainable growth, Europe must tackle these challenges

and leverage the rewards.

“Tourism is one of Europe’s most important industries and it constitutes a

powerful tool to foster economic development and employment growth. Amidst

increased competition and unpredictable events, European leaders within the

4 Outbound travel forecasts from US, Canada, China and Brazil are available on the ETC Executive Dashboard: http://etc-

dashboard.org/dashboard/market?3. The service is available to ETC members only.

http://etc-dashboard.org/dashboard/market?3

http://etc-dashboard.org/dashboard/market?3


7

sector are called to jointly co-operate to enhance the visibility of Europe and

safeguard its image as a safe and welcoming tourist destination”, said Eduardo

Santander, Executive Director of the European Travel Commission.

Jennifer Iduh (ETC Executive Unit)

With contributions from the ETC Market Intelligence Group


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1. TOURISM PERFORMANCE

SUMMARY 2016 All but two reporting destinations enjoyed a greater number of visitors in early

2016 compared to 2015. As has been the case for the past number of years,

Iceland was once again the biggest European growth destination according to

arrivals data for the first three months of 2016.

Slovakia also posted a very positive start to the year with arrivals and nights

30.1% and 23.5% higher than in the same period last year. This based on just

data for the month of January, but there is no reason why such growth cannot

be sustained following on from momentum gained during last year’s rebound

after a poor 2014. The only source markets from which arrivals in Slovakia did

not grow in double digit terms were Switzerland and India. Furthermore, India

was the only market from which arrivals to Slovakia were lower compared to

January 2015

Visits to Serbia and Romania also grew strongly based on data to February

with much of this growth coming from EU source markets. Arrivals from some

longer haul markets on the other hand have weighed on growth. In the case of

Serbia arrivals from Canada, China, and Japan were all lower than in the same

period of 2015; while in the case of Romania arrivals from Canada and Japan

were lower. However, both countries were amongst only a few markets which

saw arrivals growth from Russia, up 18.9% and 24.9% respectively.

An overvalued Swiss franc no longer pegged to the euro has resulted in a poor

start to 2016 for Switzerland. Both arrivals and nights to Switzerland have fallen

by 3.1% and 6.8% respectively in the first two months of the year compared to

the same period in 2015. However, as the impact of this exchange rate shock

fades, Switzerland should begin to see some growth as the year progresses,

and indeed, this is already evident for some long haul markets such as the US

and India.

-10

-5

0

5

10

15

20

25

30

35

40

Ice

lan

d

Slo

va

kia

Se

rbia

Rom

an

ia

Mo

nte

ne

gro

Po

lan

d

Sp

ain

Den

ma

rk

Ma

lta

Po

rtug

al

Cro

atia

Hun

ga

ry

Sw

ed

en

Fin

land

Norw

ay

Luxe

mb

ourg

Au

str

ia

Ge

rma

ny

Esto

nia

Bu

lga

ria

Mo

na

co

Sw

itze

rlan

d

Tu

rke

y

Arrivals

Nights

Source: TourMIS *Date varies (Jan-Mar) by destinations

2016 year-to-date*, % change year ago

Foreign visits and overnights to select destinations

21 The number of

European destinations

reporting growth in 2016 to

date

23 destinations have

reported on tourism

performance in 2016


9

Turkey has seen lower arrivals from all monitored source markets according to

data for the first two months of the year, with the exception of the Netherlands

from which arrivals grew by a modest 0.8% compared to the same period last

year. Lower demand is due to a combination of political unrest and the threat of

terrorism. Attacks in Turkeys have followed threats (by the same group which

claimed responsibility for attacks carried out in tourist resorts in Tunisia and

Egypt) and in excess of 100 people have been killed in terrorist attacks across

Turkey in 2016 alone. This will only continue to discourage some tourists from

visiting Turkey and the prospects for the year are not good.

The terrorist atrocities committed in Belgium in March are expected to affect

growth in its tourism sectors, but currently there are no data available to

quantify this impact. Overall, however, the impact of the attacks is likely to be

short-lived.

This same threat feeds into another key issue facing Europe’s prospects in

2016. The future of the Schengen Area hangs in the balance. At the beginning

of the year a number of countries reneged on the Agreement, reportedly in

order to stem the heavy flow of refugees. The increased threat of terrorism was

also cited as the key reason for France and Malta reinstating border controls.

At the peak of the refugee crisis nine countries within the Schengen Area had

reinstated some border controls – over one third of the countries that make up

the Area. This is likely to have a detrimental impact on trips made to these

countries from within Europe. Cross-border flows within Europe are likely to be

more affected by additional border checks than long haul arrivals which are

already subject to checks on arrival in the continent. It is clear that a large

share of the sector is at risk since around three-quarters of European travel

involves cross-border flows between Schengen countries. Tourism Economics’

initial estimate is that a reversal of Schengen Area freedoms and the imposition

of checks at all borders would reduce arrivals in the region by around 2% per

annum, relative to a baseline of no policy change as a conservative measure

based on an analysis of past changes in visa policies. This impact will vary

according to the actual implementation of any change and in the longer-run a

larger impact on long-haul travel may be evident if tour operators change

itineraries to avoid lengthy waits at borders on multi-destination trips.

2% The annual reduction of

arrivals at European borders

per annum if Schengen

freedoms are reversed

A number of countries within

the Schengen Area are

reneging on the Agreement

due to the refugee crisis


10

Tourism Performance, 2016 Year-to-Date

Country % ytd to month % ytd to month

Austria 5.3 Jan-Feb 2.9 Jan-Feb

Bulgaria 4.7 Jan-Feb

Croatia 8.1 Jan-Jan 10.7 Jan-Jan

Denmark 12.3 Jan-Feb

Estonia 4.8 Jan-Feb 0.8 Jan-Feb

Finland 8.1 Jan-Jan 4.1 Jan-Jan

Germany 5.2 Jan-Feb 5.3 Jan-Feb

Hungary 9.6 Jan-Feb 9.2 Jan-Feb

Iceland 35.5 Jan-Mar

Luxembourg 6.9 Jan-Feb

Malta 11.7 Jan-Feb 9.6 Jan-Feb

Monaco 0.1 Jan-Feb

Montenegro 6.3 Jan-Feb 17.0 Jan-Feb

Norw ay 7.0 Jan-Feb

Poland 11.9 Jan-Feb 13.2 Jan-Feb

Portugal 11.0 Jan-Jan 10.2 Jan-Jan

Romania 19.5 Jan-Feb

Serbia 23.9 Jan-Feb 27.1 Jan-Feb

Slovakia 30.1 Jan-Jan 23.5 Jan-Jan

Spain 12.5 Jan-Feb 10.6 Jan-Feb

Sw eden 8.9 Jan-Feb

Sw itzerland -3.1 Jan-Feb -6.8 Jan-Feb

Turkey -8.5 Jan-Feb

Source: TourMIS, http://w w w .tourmis.info; available data as of 27.4.16

Measures used for nights and arrivals vary by country

See TourMIS for further data including absolute values

International Arrivals International Nights


11

2. TOURISM PERFORMANCE

SUMMARY 2015 In 2015 28 reporting destinations recorded an increase in either visitor numbers

or overnights (or both) compared to 2014. This growth was spurred by the

relative weakness of the euro against the US dollar and falling oil prices.

Iceland was the top performing European destination having welcomed 30.2%

more foreign visits compared to 2014. This marked the fourth consecutive year

in which Iceland was the leading European growth destination. Over 2012 to

2015 (inclusive) Iceland grew an average 24% per annum. In addition, growth

in each year between 2012 and 2015 was greater than in the previous year.

Romania was also a top growth destination with a reported 16.9% more visitors

in 2015 compared to 2014. At the beginning of 2015 Romania was one of only

two countries which enjoyed visits growth from Russia (the other being

Montenegro). However, as Russian demand in general weakened and relations

between the two nations worsened, this growth proved to be unsustainable.

Visits to Ireland grew strongly in 2015 (by 13.7% compared to 2014). This full

year growth figure was higher than year-to-date growth to August indicating

that Ireland rallied towards the end of the year and its popularity transcends the

summer months. Some of this growth may have come at the expense of the UK

thanks to relative euro weakness against the pound which made Ireland a more

price-attractive destination.

Switzerland saw visitor arrivals fall from many of its key source markets in

2015, including Germany, France, and Italy. This is unsurprising given the

Swiss National Bank’s decision to free the Swiss franc from its peg to the euro

in order to safeguard it from the euro’s depreciation against the US dollar. As a

result Switzerland became relatively more expensive when priced in euro

terms. However, US and Indian visitor growth has compensated somewhat for

falling numbers of visitors from elsewhere in Europe.

Turkey also saw arrivals from many of its key source markets fall in 2015. Part

of the reason for this was due to political unrest and the threat of terrorism.

Events in popular tourist resorts in Tunisia and Egypt in 2015 made potential

visitors uneasy in light of threats made against Turkey by those who claimed

responsibility for those aforementioned attacks. Indeed, these threats were

acted upon and many lives were lost in multiple acts of terrorism committed

across Turkey in 2015.

28 The number of

European destinations that

reported growth in 2015

34 destinations submitted

tourism performance data in

2015


12

Tourism Performance, 2015 Year-to-Date

Country % ytd to month % ytd to month

Austria 5.6 Jan-Dec 2.6 Jan-Dec

Belgium 1.8 Jan-Dec 1.3 Jan-Dec

Bulgaria -1.2 Jan-Nov

Croatia 8.3 Jan-Dec 6.8 Jan-Dec

Cyprus 8.9 Jan-Dec -7.0 Jan-Sep

Czech Rep 7.1 Jan-Dec 4.9 Jan-Dec

Denmark 6.8 Jan-Dec

Estonia -2.7 Jan-Dec -3.8 Jan-Dec

Finland -4.0 Jan-Dec -3.6 Jan-Dec

Germany 5.9 Jan-Dec 5.7 Jan-Dec

Greece 7.6 Jan-Dec 0.6 Jan-Dec

Hungary 6.1 Jan-Dec 4.6 Jan-Dec

Iceland 30.2 Jan-Dec

Ireland Rep 13.7 Jan-Dec

Italy 4.8 Jan-Oct 2.4 Jan-Oct

Latvia 3.1 Jan-Dec -0.1 Jan-Dec

Lithuania 1.4 Jan-Dec -0.1 Jan-Dec

Luxembourg -0.3 Jan-Dec

Malta 6.0 Jan-Dec 5.1 Jan-Dec

Monaco -2.9 Jan-Dec

Montenegro 15.5 Jan-Nov 20.0 Jan-Nov

Netherlands 7.6 Jan-Nov 8.3 Jan-Nov

Norw ay 10.7 Jan-Dec

Poland 4.0 Jan-Dec 5.9 Jan-Dec

Portugal 9.7 Jan-Dec 7.3 Jan-Dec

Romania 16.9 Jan-Dec

Serbia 10.1 Jan-Dec 11.5 Jan-Dec

Slovakia 17.1 Jan-Dec 14.4 Jan-Dec

Slovenia 11.6 Jan-Dec 7.7 Jan-Dec

Spain 4.0 Jan-Sep 2.3 Jan-Sep

Sw eden 13.6 Jan-Dec

Sw itzerland 1.6 Jan-Dec -1.7 Jan-Dec

Turkey -1.4 Jan-Nov

UK 4.0 Jan-Sep

Source: TourMIS, http://w w w .tourmis.info; available data as of 13.4.16

Measures used for nights and arrivals vary by country

See TourMIS for further data including absolute values

International Arrivals International Nights


13

3. GLOBAL TOURISM FORECAST

SUMMARY Tourism Economics’ global travel forecasts are shown on an inbound and outbound basis in the

following table. These are the results of the Tourism Decision Metrics (TDM) model, which is updated

in detail three times per year. Forecasts are consistent with Oxford Economics’ macroeconomic

outlook according to estimated relationships between tourism and the wider economy. Full origin-

destination country detail is available online to subscribers.

TDM Visitor Growth Forecasts, % change year

2014 2015 2016 2017 2018 2014 2015 2016 2017 2018

d e f f f d e f f f

World 4.2% 4.3% 3.9% 4.6% 4.8% 3.8% 4.8% 4.0% 4.8% 5.0%

Americas 8.3% 4.8% 2.9% 4.4% 4.5% 7.3% 5.1% 3.0% 4.4% 4.7%

North America 9.4% 3.0% 3.5% 4.6% 4.6% 7.8% 5.2% 4.3% 5.1% 5.1%

Caribbean 5.3% 7.5% 3.0% 3.9% 4.3% 8.3% 6.9% 4.2% 4.4% 4.5%

Central & South America 6.8% 8.7% 1.3% 4.2% 4.4% 5.5% 4.4% -1.7% 1.9% 2.9%

Europe 2.1% 4.3% 3.0% 4.1% 4.1% 0.8% 3.1% 3.3% 4.4% 4.3%

ETC+4 4.5% 4.9% 2.4% 3.7% 3.7% 3.7% 4.8% 3.5% 4.2% 4.0%

EU 4.5% 5.4% 3.3% 3.5% 3.4% 3.4% 4.6% 3.5% 4.3% 4.0%

Non-EU -5.9% 0.4% 1.8% 6.4% 7.0% -8.5% -2.8% 2.3% 4.9% 5.7%

Northern 3.5% 5.7% 3.6% 4.3% 4.2% 3.3% 6.9% 3.6% 4.1% 4.1%

Western 2.3% 3.8% 2.8% 2.9% 2.4% 2.4% 2.8% 3.4% 4.5% 4.0%

Southern/Mediterranean 7.1% 4.6% 1.6% 4.2% 4.5% 5.5% 5.7% 3.2% 3.5% 4.0%

Central/Eastern -6.4% 4.0% 4.9% 5.2% 5.6% -4.2% -1.1% 3.1% 5.3% 5.9%

- Central & Baltic 4.3% 8.3% 2.7% 3.6% 3.9% 8.5% 6.9% 4.5% 4.8% 4.3%

Asia & the Pacific 5.6% 5.2% 6.9% 5.9% 6.3% 7.4% 8.3% 6.5% 6.2% 6.7%

North East 7.3% 4.5% 7.2% 6.7% 6.6% 8.0% 12.1% 6.8% 6.4% 6.8%

South East 2.8% 5.6% 6.2% 4.6% 6.0% 5.8% -0.9% 6.2% 5.2% 6.4%

South 8.3% 7.4% 6.7% 6.1% 7.0% 10.5% 4.9% 7.4% 7.6% 8.9%

Oceania 5.9% 7.0% 7.8% 6.9% 4.4% 3.7% 3.3% 1.9% 5.5% 3.9%

Africa 1.9% -1.0% 2.1% 3.5% 4.7% 1.7% -0.7% 1.8% 2.6% 3.8%

Mid East 8.6% 4.4% 5.4% 5.6% 6.5% 10.9% 9.1% 3.4% 5.0% 5.9%

* Inbound is based on the sum of the country overnight tourist arrivals and includes intra-regional flows

** Outbound is based on the sum of visits to all destinations

The geographies of Europe are defined as follows:

Northern Europe is Denmark, Finland, Iceland, Ireland, Norway, Sweden, and the UK;

Western Europe is Austria, Belgium, France, Germany, Luxembourg, Netherlands, and Switzerland;

Source: Tourism Economics

Southern/Mediterranean Europe is Albania, Bosnia-Herzegovina, Croatia, Cyprus, FYR Macedonia, Greece,

Italy, Malta, Montenegro, Portugal, Serbia, Slovenia, Spain, and Turkey;

Central/Eastern Europe is Armenia, Azerbaijan, Bulgaria, Czech Republic, Estonia, Hungary, Kazakhstan,

Kyrgyzstan, Latvia, Lithuania, Poland, Romania, Russian Federation, Slovakia, and Ukraine.

data/estimate/forecast ***

Outbound**Inbound*


14

4. RECENT INDUSTRY PERFORMANCE

INDUSTRY PERFORMANCE IS ROBUST

Year-to-date RPK growth in 2016 is outpacing 2015 in most regions.

Recession in Latin America has weighed on regional RPK growth.

The deterrent of further terror attacks in Europe appears to have been short-lived.

A strong dollar helps bring travel growth from the Americas to Europe.

4.1 AIR TRANSPORT

Revenue Passenger Kilometres (RPKs) were higher in 2016 based on data to

February in all world regions with the exception of Latin America compared to

the same period of 2015. This is a very promising start to the year, and most

notably for Africa, Asia & Pacific, and the Middle East where RPK growth

exceeded 10%. This compares to world RPK growth of 7.8%. Fragility in some

emerging market economies in the Asia & Pacific region remains a risk, but

reportedly weaker regional trade, which might stifle some business-related

travel, has yet to manifest itself in RPK performance.

Latin America entered its second straight year of recession in 2016. This has

been driven largely by the deep recession in Brazil, but has also been

compounded by recessions in Venezuela and Argentina. Invariably, both

business and leisure-related travel suffer when a country is in the throes of

economic contraction. In the case of Brazil, this summer’s Olympic Games in

Rio de Janeiro are only expected to provide temporary respite, and with

recoveries in Venezuela and Argentina also a distant prospect, RPK growth in

the region is unlikely to surpass that of 2015 at any point this year.

Africa Asia/Pacific Europe LatinAmerica

Mid. East N. America World

0

2

4

6

8

10

12

14

2014

2015

2016 ytd

Source: IATA

% year, RPK

Annual International Air Passenger Growth

7.8% The rate of World RPK

growth in 2016 to date

YTD growth based on data

to February


15

Despite a surge in terrorist activity in Europe, coupled with some industry strike

action in France and Italy, RPK growth has remained resilient with each month

since November growing at a greater rate than in the same month one year

prior. Furthermore, with each passing month RPKs have been growing at an

increasing rate compared to the month before.

Data from the Association of European Airlines (AEA) indicated higher

European airline capacity throughout the first quarter of 2016 compared to

2015, albeit with some fluctuations. However, by mid-Q1 the rate of capacity

growth normalised from which point capacity has continued to grow by around

6.5% relative to the comparable period of 2015.

Airlines appeared reluctant to increase capacity by any significant amount over

the past year, seemingly in order to maintain high load factors and to protect

fares, but lower costs and prices may now be driving some increased capacity;

oil price movements typically have a lagged impact on airlines due to hedging.

Africa Asia/Pacific Europe LatinAmerica

Mid. East N. America World

0

2

4

6

8

10

12

14

Nov-15

Dec-15

Jan-16

Feb-16

Source: IATA

% year, RPK

Monthly International Air Passenger Growth

-15

-10

-5

0

5

10

15

20

Ma

r-0

6

Au

g-0

6

Jan

-07

Jun

-07

Nov-0

7

Ap

r-08

Se

p-0

8

Fe

b-0

9

Jul-

09

Dec-0

9

Ma

y-1

0

Oct-

10

Ma

r-1

1

Au

g-1

1

Jan

-12

Jun

-12

Nov-1

2

Ap

r-13

Se

p-1

3

Fe

b-1

4

Jul-

14

Dec-1

4

Ma

y-1

5

Oct-

15

Total

3mth mav

Source: IATA

% year, RPK

International Air Passenger Traffic Growth


16

Oil prices are no longer in decline but remain at a level last seen over ten years

ago. An OPEC meeting in April concluded without an agreement between

OPEC members (excluding Iran), as well as Russia and other non-OPEC

members, to freeze production at January production levels. In any case, such

an agreement would have only a marginal effect on eroding global excess

supply and boosting prices.

Passenger load factor appears to have followed a broadly similar pattern to

2014 and 2015, with some deviations to reflect the variable timing of the Easter

holiday period. So far in 2016 PLF has peaked at 82.6%. This is slightly lower

than peaks observed during the equivalent periods of 2014 and 2015. For 2016

to date, PLF has averaged 78% which is lower than in these prior years.

Travel between Europe and Asia increased at a faster rate than total European

airline passenger growth throughout most of 2014 but slowed later in the year

and into 2015. Although growth picked-up again towards the end of 2015 and

once again outpaced total European growth, a significant slowdown was

notable in the latter weeks of 2015. In 2016 total European airline passenger

growth began to outpace European-Asian airline passenger growth. This may

-2

0

2

4

6

8

10

12

14

Q1 Q2 Q3 Q4

2014

2015

2016

Source: AEA

ASK, 4 week moving average, % change year ago

European Airlines Capacity

70

72

74

76

78

80

82

84

86

88

90

Q1 Q2 Q3 Q4

2014

2015

2016

Source: AEA

Weekly load factor, %

European Airlines Passenger Load Factor

83% Peak of European airline

passenger load factor in

2016

Based on data for Q1


17

be related to fears regarding recent terrorist attacks but is also consistent with

some slowdown in demand from China and other emerging markets as well as

continued modest growth from Japan. By the end of Q1 2016, in growth terms

both flows had diverged to an unprecedented extent: so far in 2016 the average

percentage point (pp) difference between them is 2.5. In 2015 this gap

averaged just 0.3pp.

Air passenger flows between Europe and the Americas continued to grow at a

faster rate than total scheduled travel to and from Europe for all but a few

weeks of 2015. This trend continued into 2016 at which point the two flows also

diverged to an unprecedented degree. So far in 2016 the average pp difference

between is 5.3. In 2015 this gap averaged 1.7pp. The greatest pp difference

observed in 2016 was 9.8. United States outbound travel to Europe has been

particularly strong due to the relative strength of the dollar against key

European currencies, (most notably the euro) as well as favourable economic

conditions in the United States.

-4

-2

0

2

4

6

8

10

12

14

16

Asia

Total

Source: AEA

RPK, 4 week moving average, % change year ago

European Airline Passenger Traffic: Asia

-5

0

5

10

15

20

Americas

Total

Source: AEA

RPK, 4 week moving average, % change year ago

European Airline Passenger Traffic: Americas

9.8pp The gap between Europe-

Americas and total European

airline passenger growth in

2016

This was the biggest

observed pp difference in

2016


18

4.2 ACCOMMODATION

Global accommodation sector performance was mixed in the first quarter of

2016. The worst performing region was the Middle East & Africa where all three

measures of Occupancy, ADR and RevPAR showed a downturn compared to

the first quarter of 2015. At the same time, all other regions boasted at least

one positive performance measure.

In Asia/Pacific occupancy increased slightly by 1.7% compared to the first three

months of 2016. However, average daily rates (ADR) in the region fell by 4.9%

in US dollar terms and 4.2% in euro terms over the same period. As a result,

revenue per available room (RevPAR) also fell.

In the Americas, room rates continued to rise in US$ terms (+2.4%) despite

some fall in occupancy rates (-0.7%) in the first three months of 2016, although

performance varies across the sub-regions. South America’s accommodation

sector has felt the pinch of the recessions faced by Argentina, Brazil, and

Venezuela, to name just a few, with all measures lower compared to the same

period of 2015 and RevPAR down almost 20% in the quarter. By contrast North

American occupancy was only marginally lower than in the prior year, and

close to the typical average, allowing hotels to continue to exercise pricing

power and raise rates indicating some optimism regarding future growth.

In Europe as a whole, accommodation sector performance was rather

subdued, with occupancy growing by 0.8% compared to the same period in

2015. ADR fell by an equivalent amount and RevPAR was unchanged.

Within the European total, occupancy rates grew by 3.4% in Eastern Europe,

almost offsetting the 3.7% reduction in ADR compared to 2015. RevPAR was

0.5% lower in 2016 Q1 as a result. Occupancy in several countries is

rebounding from the extreme falls experienced in 2014 and 2015 associated

with the Russia-Ukraine crisis which marred tourism to the region. Occupancy

is only now just above 50%, however, and it will take some time yet to restore

pre-crisis occupancy levels as well as the confidence to significantly raise ADR.

Asia/Pacific Americas Europe Middle East/Africa

-12

-10

-8

-6

-4

-2

0

2

4

Occ

ADR*

RevPAR*

Source: STR Global

Jan-Mar year to date, % change year ago

Global Hotel Performance

* ADR and RevPAR denominated in USD except for Europe

0.8% The rate of occupancy

growth in Europe in 2016

Based on 2016 year-to-date

data to March


19

5. SPECIAL FEATURE

THE ECONOMIC IMPLICATIONS OF BREXIT

The UK government has pledged to hold a referendum on 23rd

June on whether

Britain should remain a member of the EU by the end of 2017. Assuming a vote

to leave, the government will likely face an intensive, time-constrained period of

just two years in which to conclude a new deal covering trade and market

access that will govern Britain’s relationship with the EU for, potentially,

decades to come.

The implications of Brexit for the UK economy, business, consumers, and

tourists could be substantial and far-reaching. The possibilities for what kind of

a trade deal the government manages to cut are many and varied, but

regardless, in the event of Brexit, whichever trade settlement is adopted and

whichever scenario comes to pass, there will be a long term structural impact

on the UK and EU economies. Britain is the EU’s second largest economy and

almost half of all its overseas investment comes from the EU, as do a similar

proportion of its export revenues. In tourism terms, Britain is the EU’s second

largest source market and its sixth largest destination market.

Research conducted by Oxford Economics suggests that the long-term

economic risks and opportunities presented by EU withdrawal are strongly

asymmetric. Certainly, although any upside effects appear to be limited and the

worst-case scenarios are not catastrophic, they would impose a significant long

term cost on the UK economy. The worst-case scenario would suggest a

decline of almost 4% in real GDP by 2030 compared to what it would be if

Britain remained within the EU.

In the nearer term, some significant disruption would be evident and the path of

quarterly GDP growth could be 0.6pp lower on average over the following two

years should the UK leave the EU versus remaining a member state. At its

greatest this growth gap is estimated by Oxford Economics to reach almost

1.0pp in late 2017, while other sources estimate a larger potential impact.

Forecast

0.0

0.5

1.0

1.5

2.0

2.5

3.0

3.5

Brexit

Baseline

Source: Oxford Economics

% year

UK GDP Growth

4% Amount of GDP lost if Britain

left the EU

Versus GDP if Britain

remained within the EU by

2030


20

Brexit, if badly managed, would impose significant costs on UK citizens and

businesses. In the worst-case scenario, the UK could see as much as £1,027

wiped off its per capita income by 2030 (in today’s prices). At the other end of

the spectrum, the best-case suggests a small rise in income per head of £38 by

2030 is possible.

In any case, it will be impossible to avoid some degree of trade destruction in

which UK trade volumes fall as a share of GDP. This reflects the increased cost

of trade between the UK and the EU, which, in turn, encourages firms and

consumers, in both the UK and the rest of the EU to consume domestically-

produced goods. In the worst-case exports could fall by as much as 8.8% and

imports by as much as 9.4% compared to what they would be if Britain

remained within the EU.

For businesses operating in the UK the impact on investment would be marked.

There is a very wide range of potential effects on business investment. In the

worst-case scenario private sector business investment would be £21.1 billion

(0.8% of GDP) lower in today’s money by 2030 compared to what it would be if

Britain remained within the EU. This is equivalent to each private sector

organisation in the country investing over £4,000 less than it would otherwise

have done. Impacts will also be very noticeable in the short-term as the

uncertain environment will dissuade potential investors from spending within

the economy. Indeed, the increase in political and economic uncertainty in the

run up to the referendum will dampen investment activity in 2015 and anecdotal

evidence suggests that this is already evident.

Large depreciation in sterling against all major currencies have been estimated

under Brexit in the sort-term outlook, arising from the uncertainty and reduced

investment, and with significant impacts for foreign travel to destinations both

within the EU and further afield. Weaker sterling values in the past five years

have been associated with some more subdued outbound travel demand:

tourism departures in 2015 remained lower than pre-recession peak levels

achieved in 2006 when the currency was stronger. Further depreciation,

coupled with the reduced GDP and average wealth following Brexit, would

erode the outbound tourism growth in the baseline outlook.

Forecast

1.00

1.05

1.10

1.15

1.20

1.25

1.30

1.35

1.40

1.45

1.50

Brexit

Baseline


€/£

Euro/Pound Exchange Rate

£21.1bn The total amount of lost

business investment by 2030

This is the worst-case

scenario if Britain left the EU

versus remaining a member


21

6. KEY SOURCE MARKET

PERFORMANCE

2016 STARTS STRONG

European travel demand continues to grow across the majority of markets.

Lower oil prices and weak euro aid European inbound tourism growth.

Economic slowdown in China a distant worry?

Schengen Area in limbo amid terrorism concerns and a worsening refugee crisis.

Trends discussed in this section in some cases relate to the first three months of the year although

actual coverage varies by destination. For the majority of countries February or March will be the

latest available data point.

Further detailed monthly data for origin and destination, including absolute values, can be obtained

from TourMIS, http://tourmis.info.

6.1 KEY INTRA-EUROPEAN MARKETS

Slovakia reported arrivals growth of 37.6% from Germany in the first month of

2016. Since visits from Germany represented close to one tenth of total arrivals

to Slovakia, growth of this magnitude is impressive. Germany is also a huge

source markets for Austria, accounting for one third of arrivals in all forms of

paid accommodation establishments which equated to 12 million in 2015.

German arrivals growth of 4.8% and overnights growth of 4.5% to Austria is

therefore significant in volumes terms.

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Mo

na

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Bu

lga

ria

Arrivals

Nights



German visits and overnights to select destinations

18 out of 22 destinations

reported growth from

Germany pointing to

continued intra-regional

growth in 2016


22

Bulgaria enjoyed a huge influx of Dutch visitors during the first two months of

2016, up 254% compared to the same period in 2015. Although we expect this

will temper as the year progresses, strong growth from the Netherlands to

Bulgaria should be sustainable. The same is true of Montenegro where Dutch

visits and overnights also grew substantially. Meanwhile, a strong Swiss franc

deterred Dutch arrivals and overnights which were 10.0% and 22.1% lower

compared to the first two months of 2015.

A relatively large number of destination markets reported falling arrivals from

France in the first few months of 2016. This is perhaps reflective of the caution

that exists in France at present, but should dissipate as the year progresses

and confidence returns. Montenegro reported the largest falls in French visitor

numbers, down 53.9% based on the first two months of 2016 compared to the

same period of 2015.

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0

10

20

30

40

50

60

70

Bu

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Luxe

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Ro

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Esto

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Mo

na

co

Cro

atia

Sw

itze

rlan

d

Arrivals

Nights



Dutch visits and overnights to select destinations

Bulgaria, 254% (A)

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-15

5

25

45

65

Slo

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Norw

ay

Po

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Den

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co

Fin

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Luxe

mb

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Tu

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Mo

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gro

Arrivals

Nights



French visits and overnights to select destinations

Bulgaria may be benefitting

as a lower cost ski

destination for Dutch

travellers


23

The number of nights spent in Denmark by Italians increased dramatically in

the first two months of 2016 compared to the same period in 2015, up 40.6%.

Arrivals to Luxembourg from Italy also increased markedly (+30.0%) in the

same time period. Malta also reported substantial arrivals and overnights from

Italy (by 18.6% and 19.5% respectively) based on data to February. This is

significant given the size of the Italian market as a proportion of total arrivals to

Malta accounting for one seventh of total arrivals.

Spain and Portugal continue to appeal to the UK market, even outside of the

main summer holiday period, despite the increasing choice and access to other

European destination markets. In the first two months of 2016 UK arrivals to

Spain grew by 16.7%, while nights grew by 20.0% compared to the same

period of 2015. Since arrivals from the UK represented close to 25% of total

arrivals to Spain in 2014, growth of this magnitude is also substantial in

absolute terms. In Portugal arrivals from the UK grew by 14.5% and nights by

16.2% in January. Since arrivals from the UK accounted for close to 16% of

total arrivals to Portugal, such growth is significant in absolute terms.

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Arrivals

Nights



Italian visits and overnights to select destinations

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-5

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35

45

55

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Arrivals

Nights



UK visits and overnights to select destinations


24

Malta reported mega arrivals growth from Russia (+54.2%), one of only a few

countries to do so in 2016. But given the relative size of the travel flows, this

growth is unlikely to offset the falls to larger, established winter markets for

Russian travel such as Estonia and Finland. More than half of reporting

destinations saw travel from Russia fall in early 2016; arrivals fell most

substantially in Turkey, down 54.4% in the first two months of 2016 compared

to the same period of 2015. Relations between the two nations have been

fragile since the Turkish Air Force shot down a Russian fighter jet for infringing

upon its airspace in November 2015. However, a thawing in relations between

the two has been observed recently and it will be interesting to see how this

manifests itself in tourism performance data as the year progresses.

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-5

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45

55

Ma

lta

Rom

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Ice

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d

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Tu

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Arrivals

Nights



Russian visits and overnights to select destinations


reported falling arrivals or

overnights from Russia

including large winter

destinations such as Estonia

and Finland


25

6.2 NON-EUROPEAN MARKETS

All but four reporting destinations enjoyed growth from the US in the first

months of 2016 in either arrivals or overnights and air passenger data points to

continued growth to the region throughout Q1. Norway reported the greatest

increase in American visitor numbers, up 245% according to data for the first

two months of the year. Estonia and Slovakia also enjoyed strong growth from

the US with overnights outpacing arrivals to indicate that visitors from the US

are, on average, staying in the country for longer.

Japan’s economy has been in and out of recession over the past few years and

this has been evident in reported outbound tourism performance, while the

weaker yen has hit affordability for international travel. Nonetheless, arrivals

growth was reported in over half of reporting destinations, most notably in

Poland and Estonia where arrivals were up 119% and 84.7% respectively

according to data for the first two months of 2016 compared to same period in

2015. Arrivals from Japan also grew substantially in Montenegro by 70.5% over

the same period.

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US visits and overnights to select destinations

Norway, 245% (N)

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Arrivals

Nights



Japanese visits and overnights to select destinations

Poland, 119% (A)


reported arrivals growth from

the US and strong air

passenger growth suggests

this will continue


26

China continues to be a source of huge arrivals growth for many European

destinations, albeit from some lower volumes than for more established

markets. However, this early data is consistent with some slower growth from

China, indicated by some weaker air passenger data. Converse to data

pertaining to Japan, Chinese overnights growth outstripped arrivals in many

destinations including Montenegro, Croatia, Austria, and Germany. This

indicates that in these destinations the average length of a Chinese visit is

increasing. This may be linked to the closure of some EU borders at the

beginning of the year which will have added a degree of inconvenience for the

Chinese visitors wishing to visit as many European destinations in a single trip

as they might have done previously.

All but three reporting destinations enjoyed arrivals growth from India. Germany

was one destination which saw Indian arrivals and overnights fall based on

data for the first two months of year compared to the same month of 2015. And

although the number of Indians arriving in Finland grew (+23.6%), the number

of Indian overnights fell by 16.9%.

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Nights



Chinese visits and overnights to select destinations

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85

Cro

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Arrivals

Nights



Indian visits and overnights to select destinations

Croatia, 142% (N) & 106% (A)


27

Some destinations reported substantial arrivals and overnights growth from

Canada in the first few months of 2016. In January, Finland reported arrivals

growth of 175% and overnights growth of 701% compared to January 2015,

albeit on some small volumes, associated with their hosting of the Ice-Hockey

Junior Championships. Slovakia was similarly prosperous receiving 113% more

Canadian arrivals in January 2016 than in January 2015, and 88.7% more

Canadian overnights over the same period. But with only data for January

available for these countries, it is very unlikely that this growth can be sustained

as the year progresses.

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90

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Arrivals

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Canadian visits and overnights to select destinations

Finland, 701% (N) & 175% (A) Slovakia, 113% (A)


28

7. ORIGIN MARKET SHARE ANALYSIS

METHODOLOGY

Based on the Tourism Decision Metrics (TDM) model, the following charts and analysis show

Europe’s evolving market position – in absolute and percentage terms – for selected source

markets. 2015 values are, in most cases, year-to-date estimates based on the latest available

data and are not final reported numbers.

Data in these charts and tables relate to reported arrivals in all destinations as a comparable

measure of outbound travel for calculation of market share.

For example, US outbound figures featured in the analysis are larger than reported departures

in national statistics as long haul trips often involve travel to multiple destinations. In 2014 US

data reporting shows 11.9m departures to Europe while the sum of European arrivals from the

US was 23.4m. Thus each US trip to Europe involved a visit to two destinations on average.

The geographies of Europe are defined as follows:

Northern Europe is Denmark, Finland, Iceland, Ireland, Norway, Sweden, and the UK;

Western Europe is Austria, Belgium, France, Germany, Luxembourg, Netherlands, and

Switzerland;

Southern/Mediterranean Europe is Albania, Bosnia-Herzegovina, Croatia, Cyprus, FYR

Macedonia, Greece, Italy, Malta, Montenegro, Portugal, Serbia, Slovenia, Spain, and Turkey;

Central/Eastern Europe is Armenia, Azerbaijan, Bulgaria, Czech Republic, Estonia, Hungary,

Kazakhstan, Kyrgyzstan, Latvia, Lithuania, Poland, Romania, Russian Federation, Slovakia,

and Ukraine.


29

7.1 UNITED STATES

0

10,000

20,000

30,000

40,000

50,000

60,000

70,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rest of Long Haul Central/Eastern Europe

Southern Europe Western Europe

Northern Europe

*Long haul defined as tourist arrivals to destinations outside North America Source: Tourism Economics

Visits, 000s

US Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%

20%Northern Europe Western Europe

Southern Europe Central/Eastern Europe


% share of long haul* market

Europe's Share of US Market

US Market Share Summary

2016

Total outbound travel (000s) 102,575 - 4.7% 25.9% - 33.0% -

Long haul (000s) 61,921 60.4% 5.6% 31.2% 62.9% 31.6% 61.0%

Short haul (000s) 40,654 39.6% 3.3% 17.8% 37.1% 35.2% 39.0%

Travel to Europe (000s) 27,216 26.5% 5.7% 31.9% 27.8% 31.8% 26.8%

Northern Europe (000s) 6,392 6.2% 6.0% 34.1% 6.6% 29.6% 6.4%

Western Europe (000s) 9,682 9.4% 3.9% 21.2% 9.1% 23.6% 10.2%

Southern Europe (000s) 7,315 7.1% 6.4% 36.6% 7.7% 36.0% 7.0%

Central/Eastern Europe (000s) 3,828 3.7% 7.9% 46.3% 4.3% 53.1% 3.2%

*Shows cumulative change over the relevant time period indicated

**Shares are expressed as % of total outbound travel


Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


30

7.2 CANADA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Northern Europe


Visits, 000s

Canada Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

2%

4%

6%

8%

10%

12%

14%

16%

18%





Europe's Share of Canadian Market

Canada Market Share Summary

2016


Long haul (000s) 11,907 35.1% 4.9% 27.0% 35.5% 10.8% 32.7%

Short haul (000s) 22,051 64.9% 4.5% 24.5% 64.5% -0.2% 67.3%


Northern Europe (000s) 1,083 3.2% 8.0% 46.9% 3.7% 7.5% 3.1%

Western Europe (000s) 1,711 5.0% 3.3% 17.9% 4.7% 11.5% 4.7%


Central/Eastern Europe (000s) 260 0.8% 3.1% 16.6% 0.7% 3.1% 0.8%

*Show s cumulative change over the relevant time period indicated



Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


31

7.3 MEXICO

0

500

1,000

1,500

2,000

2,500

3,000

3,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Northern Europe


Visits, 000s

Mexico Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

5%

10%

15%

20%

25%

30%





Europe's Share of Mexican Market

Mexico Market Share Summary

2016


Long haul (000s) 2,944 13.5% 4.5% 24.6% 13.5% 47.4% 12.7%

Short haul (000s) 18,814 86.5% 4.5% 24.6% 86.5% 37.0% 87.3%


Northern Europe (000s) 116 0.5% 3.7% 20.1% 0.5% 40.4% 0.5%

Western Europe (000s) 640 2.9% 3.7% 20.1% 2.8% 3.6% 3.9%

Southern Europe (000s) 585 2.7% 0.7% 3.7% 2.2% 50.6% 2.5%





Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


32

7.4 ARGENTINA

0

500

1,000

1,500

2,000

2,500

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rest of Long Haul

Central/Eastern Europe

Southern Europe

Western Europe

Northern Europe

*Long haul defined as tourist arrivals to destinations outside South America Source: Tourism Economics

Visits, 000s

Argentina Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

5%

10%

15%

20%

25%

30%

35%

40%





Europe's Share of Argentinian Market

Argentina Market Share Summary

2016


Long haul (000s) 2,334 29.6% 2.7% 14.2% 30.3% 21.7% 27.9%

Short haul (000s) 5,557 70.4% 2.0% 10.1% 69.7% 11.9% 72.1%

Travel to Europe (000s) 930 11.8% 3.6% 19.5% 12.6% 42.0% 9.5%


Western Europe (000s) 45 0.6% 2.7% 14.0% 0.6% 21.5% 0.5%






Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


33

7.5 BRAZIL

0

1,000

2,000

3,000

4,000

5,000

6,000

7,000

8,000

9,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Northern Europe


Visits, 000s

Brazil Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

5%

10%

15%

20%

25%

30%





Europe's Share of Brazilian Market

Brazil Market Share Summary

2016


Long haul (000s) 6,608 71.0% 2.6% 13.5% 71.6% 16.0% 69.2%

Short haul (000s) 2,697 29.0% 2.0% 10.4% 28.4% 6.4% 30.8%

Travel to Europe (000s) 3,180 34.2% -0.1% -0.5% 30.2% 2.0% 37.9%


Western Europe (000s) 1,459 15.7% -0.4% -1.8% 13.7% 5.9% 16.7%

Southern Europe (000s) 1,135 12.2% -2.4% -11.3% 9.6% -5.1% 14.5%





Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


34

7.6 INDIA

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Northern Europe

*Long haul defined as tourist arrivals to destinations outside South Asia Source: Tourism Economics

Visits, 000s

India Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

1%

2%

3%

4%

5%

6%

7%

8%

9%



*Long haul defined as tourist arrivals to destinations outside South Asia Source: Tourism Economics


Europe's Share of Indian Market

India Market Share Summary

2016


Long haul (000s) 14,346 94.9% 7.7% 44.8% 95.2% 45.3% 94.7%

Short haul (000s) 764 5.1% 6.4% 36.4% 4.8% 39.3% 5.3%



Western Europe (000s) 884 5.9% 6.1% 34.2% 5.4% 43.7% 5.9%






Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


35

7.7 CHINA

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Rest of Long Haul

Central/Eastern Europe

Southern Europe

Western Europe

Northern Europe

*Long haul defined as tourist arrivals to destinations outside Northeast Asia Source: Tourism Economics

Visits, 000s

China Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

5%

10%

15%

20%





Europe's Share of Chinese Market

China Market Share Summary

2016


Long haul (000s) 40,480 45.5% 7.9% 46.0% 47.6% 184.0% 35.0%

Short haul (000s) 48,416 54.5% 6.1% 34.3% 52.4% 83.0% 65.0%



Western Europe (000s) 6,635 7.5% 9.0% 53.8% 8.2% 165.5% 6.1%


Central/Eastern Europe (000s) 3,930 4.4% 8.1% 47.7% 4.7% 119.6% 4.4%




Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


36

7.8 JAPAN

0

2,000

4,000

6,000

8,000

10,000

12,000

14,000

16,000

2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016



Northern Europe


Visits, 000s

Japan Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

2%

4%

6%

8%

10%

12%

14%

16%





Europe's Share of Japanese Market

Japan Market Share Summary

2016

Total outbound travel (000s) 21,790 - 5.7% 32.1% - -1.1% -

Long haul (000s) 14,285 65.6% 6.1% 34.4% 66.7% 14.0% 56.9%

Short haul (000s) 7,505 34.4% 5.0% 27.7% 33.3% -21.0% 43.1%



Western Europe (000s) 2,230 10.2% 4.3% 23.6% 9.6% 13.3% 8.9%






Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


37

7.9 UNITED ARAB EMIRATES

0

200

400

600

800

1,000

1,200

1,400

1,600

1,800

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015



Northern Europe

*Long haul defined as tourist arrivals to destinations outside Middle East Source: Tourism Economics

Visits, 000s

UAE Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

5%

10%

15%

20%

25%



*Long haul defined as tourist arrivals to destinations outside Middle East Source: Tourism Economics


Europe's Share of Emirati Market

United Arab Emirates Market Share Summary

2016


Long haul (000s) 1,556 42.7% 3.3% 17.7% 36.6% 34.3% 40.4%

Short haul (000s) 2,087 57.3% 8.8% 52.1% 63.4% 21.9% 59.6%

Travel to Europe (000s) 922 25.3% 3.0% 15.9% 21.3% 39.2% 23.1%


Western Europe (000s) 379 10.4% 1.0% 4.9% 7.9% 33.6% 9.9%


Central/Eastern Europe (000s) 24 0.7% 5.8% 32.8% 0.6% -16.1% 1.0%




Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


38

7.10 RUSSIA

0

5,000

10,000

15,000

20,000

25,000

30,000

35,000

40,000

45,000

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015

Rest of World Central/Eastern Europe


Northern Europe

*Long haul defined as tourist arrivals to all destinations Source: Tourism Economics

Visits, 000s

Russia Long Haul* Outbound Travel

2005 2007 2009 2011 2013 2015 2017 2019

0%

10%

20%

30%

40%

50%

60%



*Long haul defined as tourist arrivals to all destinations Source: Tourism Economics


Europe's Share of Russian Market

Russia Market Share Summary

2016

Total outbound travel (000s) 25,945 - 8.2% 48.2% - -15.6% -

Long haul (000s) 6,929 26.7% 6.3% 35.6% 24.4% 14.4% 19.7%

Short haul (000s) 19,016 73.3% 8.9% 52.8% 75.6% -23.0% 80.3%

Travel to Europe (000s) 19,016 73.3% 8.9% 52.8% 75.6% -23.0% 80.3%

Northern Europe (000s) 1,210 4.7% 6.8% 39.2% 4.4% -25.7% 5.3%

Western Europe (000s) 1,664 6.4% 5.1% 28.2% 5.5% 0.1% 5.4%


Central/Eastern Europe (000s) 9,314 35.9% 9.6% 58.0% 38.3% -36.9% 48.0%




Growth (2016-21) Growth (2011-16)

Level Share**Annual

average

Cumulative

growth*Share 2021**

Cumulative

growth*Share 2011**


39

8. ECONOMIC OUTLOOK

Assessing recent tourism data and industry performance is a useful way of directly monitoring

the key trends for travel demand across Europe. This can be complemented by looking at key

trends and relationships in macroeconomic performance in Europe’s key source markets

which can provide further useful insight into likely tourism developments throughout the year.

The linkages between macro and tourism performance can be very informative. For example,

strong GDP or consumer spending growth is an indication of rising prosperity with people more

likely to avail of international travel. It is also an indication of rising business activity and

therefore stronger business travel. Movements in exchange rates against the euro can be

equally important as it can influence choice of destination. For example, if the euro appreciated

(gained value) against the US dollar, the Eurozone would become a more expensive

destination and therefore potentially less attractive for US visitors. Conversely, depreciation of

the euro against the US dollar would make the Eurozone a relatively cheaper destination and

therefore more attractive to US travellers.

8.1 OVERVIEW

FORECASTS STEADY BUT NEAR-TERM SIGNALS MIXED

2016 has got off to a shaky start, with sharp declines in global equity markets

and renewed jitters about China and its currency. Recent asset market trends

have prompted some observers to suggest a high risk of a global recession this

year. Our world growth forecasts are steady this month, at 2.3% for 2016 and

2.7% for 2017. One factor behind the more stable outlook is the rally in financial

markets since mid-February. This rally appears to have been the result of a

number of factors including a more dovish Fed and an improvement in some

near-term economic indicators.

The implied 12-month ahead Fed funds rate dropped around 0.5% from its

January peak to mid-February and remains around 0.35% lower now. So the

0.20

0.40

0.60

0.80

1.00

400

420

440

460

480

500

520

Jan-15 Apr-15 Jul-15 Oct-15 Jan-16 Apr-16

World: Fed rate expectations and stocksIndex

Source : Oxford Economics/Haver Analytics

12-month ahead implied Fed Funds rate (RHS)

FTSE world

%


40

Fed still apparently has the capacity to boost markets with changes in

communication policy.

The Citigroup economic surprise indicators have also improved over recent

weeks, especially for emerging markets where the indicator is back in positive

territory. The G10 index nevertheless remains clearly negative. Other economic

signals are mixed. The latest reading of OE’s world trade indicator (based on

survey evidence for March) suggests a modest improvement, although again

the indicator continues to signal weak world trade growth.

Meanwhile, there have been some warnings of potentially softer labour market

conditions. Though payrolls gains have remained solid, a weighted sum of the

employment subindices of the US ISM surveys has dropped sharply over

recent months. A similar index for the Eurozone is more positive, although it

has also softened from its late-2015 peaks. These mixed signals suggest

limited likelihood of near-term upgrades to the world growth outlook and overall

we maintain our view from last month that risks look skewed to the downside

such that further monetary policy stimulus remains a possibility.

This assessment appears to be shared, to some extent at least, by global bond

markets. US 10-year yields have dropped back to only 1.7% since mid-March

(only 0.1% above their February lows), with German yields at just 0.1% and

Japanese yields at -0.1%. And so the ‘great squeeze’ on G7 bond yields is still

continuing.

-4.0

-3.0

-2.0

-1.0

0.0

1.0

2.0

30

35

40

45

50

55

60

2006 2008 2010 2012 2014 2016

US employment and world trade trendsIndex, breakeven=50


OE world trade indicator (RHS)US ISM

employment*(LHS)

* Employment sub-indices of ISM surveys, weighted 88% services/12% manufacturing

Standardised Index


41

Summary of economic outlook, % change year ago*

UK 2.1% 2.5% -0.3% -7.1% 0.5% 2.3% 2.1% 0.0% 5.1% 1.4%

France 1.4% 1.3% -0.1% 0.0% 0.1% 1.7% 1.7% -0.4% 0.0% 1.2%

Germany 1.7% 1.9% -0.2% 0.0% 0.5% 1.9% 1.7% 0.2% 0.0% 1.8%

Netherlands 1.6% 1.6% -0.6% 0.0% 0.5% 1.9% 2.0% 0.1% 0.0% 1.6%

Italy 1.0% 1.2% -0.4% 0.0% 0.1% 1.3% 1.1% -0.3% 0.0% 1.5%

Russia -2.1% -5.5% 0.3% -16.0% 7.6% 0.8% -0.4% 0.0% 5.8% 5.7%

US 2.0% 2.6% -0.4% 2.2% 1.0% 2.4% 2.5% -0.3% 2.0% 2.0%

Canada 1.1% 1.0% 0.4% -2.9% 1.3% 2.2% 1.7% -0.1% 3.2% 2.1%

Brazil -4.4% -4.7% 3.3% -14.3% 8.6% -0.3% -1.6% 1.9% -9.7% 5.6%

China 6.5% 7.5% 0.0% -4.0% 2.2% 6.2% 7.0% 0.0% 0.9% 2.1%

Japan 0.5% -0.1% -0.2% 7.1% 0.1% 0.3% 0.3% -0.2% -3.7% 2.3%

India 7.4% 7.0% -0.1% -1.6% 5.4% 7.2% 7.1% 0.0% 1.4% 5.2%


* Unless otherw ise specif ied

** Percentage point change

2016 2017

Country

*** Exchange rates measured against the euro. A positive change indicates stronger local currency against the euro and therefore a positive impact on

outbound tourism demand. A negative change indicates w eaker local currency against the euro and therefore a negative impact on outbound tourism

demand.

GDPConsumer

expenditure

Unemploy-

ment **

Exchange

rate***Inflation

Consumer

expenditure

Unemploy-

ment *

Exchange

rate***InflationGDP


42

8.2 EUROZONE

Although external weakness is still weighing on the Eurozone recovery, the

gradual domestic healing that we have seen take place over the past couple of

years remains firmly in place.

On the whole the timely activity data appear to paint conflicting messages

about the likely pace of GDP growth in Q1. Despite ticking up in March, the

composite PMI over Q1 as a whole recorded its lowest average reading since

Q1 2015. By contrast, retail sales, new car registrations and industrial

production are all on track to grow at a much faster pace in Q1 than Q4.

Typically, with two of three monthly readings available for most of the hard

indicators, we would put more weight on the hard data than the surveys,

implying that GDP growth strengthened in Q1. Indeed, reflecting the strength of

hard data our GDP indicator suggests that the risks to our forecast for GDP

growth to rise to 0.5% in Q1 lie to the upside.

Much of the pick-up in growth in Q1 is likely to reflect temporary factors. In

particular, both industry and construction growth is unlikely to maintain the

expected robust pace of expansion recorded in Q1, suggesting that growth

should slow in Q2.

Nonetheless, the domestic recovery is likely to continue into the second half of

the year. Indeed, while we have cut our 2016 GDP growth forecast since the

beginning of the year in response to external weakness, our forecast for

domestic demand growth has inched up from 1.9% to 2.1% on the back of

signs that the recovery may be broadening from household spending.

The GDP growth forecast for 2016 is 1.6%. Next year we expect growth of

1.8%. While this pace of growth should ensure that deflation is not a worry, a

very gradual pick-up of inflation is expected. Further negative shocks would

mount pressure on the ECB to do more.

-4

-3

-2

-1

0

1

2

2000 2003 2006 2009 2012 2015

GDP % q/q

GDP Indicator

Source: Oxford Economics/Haver Analytics

Euro area GDP indicator

% q/q


43

8.3 UNITED KINGDOM

2015 ended on a disappointing note with the National Accounts for Q3 2015

seeing downward revisions to quarterly GDP growth in both Q2 (from 0.7% to

0.5%) and Q3 (from 0.5% to 0.4%). Although we remain on course to see an

uptick in growth to around 0.6% in Q4, we are likely to see the preliminary

estimate for 2015 as a whole come in at just 2.2%. This would be well down on

2014 and would be particularly disappointing given the extent to which the

economy has benefitted from very low inflation and a sizeable amount of spare

capacity.

The expenditure breakdown confirmed growth in Q3 was driven exclusively by

the domestic economy and in particular the consumer sector. However, the

data for inventories and trade shows such volatility from quarter-to-quarter that

there are sizable question marks about its reliability: we would be surprised if

there were not significant revisions over the coming quarters, continuing the

pattern of recent years.

More positively, the larger trade deficit in Q3 was not reflected in a widening of

the current account deficit. This was due to a decline in the deficit on primary

(or net investment) income. This component had been largely responsible for

the deterioration in the UK current account since the financial crisis, reflecting

the poor performance of UK investments abroad. But with our key trading

partners forecast to enjoy stronger economic growth over the coming years, the

performance of UK investments abroad should continue the recent

improvement, moving the primary income balance back into surplus.

Recent speeches and media interviews by MPC members have focused on the

need to see a sustained pickup in wage growth before there was a possibility of

interest rates increasing. While compositional effects, chiefly a drop in hours

worked, are largely to blame for the recent slowdown in wage growth, we

expect the pickup in pay to be gradual and, therefore, see a growing risk that

the first rate rise will come later than our forecast of Q4 2016.

-6

-4

-2

0

2

4

6

2004 2006 2008 2010 2012 2014 2016 2018

% year

Consumer spending

Real disposableincome


Forecast

UK: Consumer spending and income


44

8.4 UNITED STATES

Real GDP growth was revised up to 1.4% (seasonally adjusted annual rate) in

Q4 2015 with final sales up 1.6% and inventories subtracting 0.2pp from

growth. Consumer spending and residential investment supported growth while

business investment and trade were significant drags on economic activity.

Employment growth remains firm with payrolls advancing a solid 215,000 in

March, wages rebounding 0.3% on the month, and the participation rate rising

to 63%. We continue to expect stronger wage growth this year as labour

market slack dissipates.

Adjusted for inflation, disposable income rose 0.3% in February, and

maintained a fairly solid 2.7% year-on-year pace. Consumer spending was

2.8% higher than a year earlier and is expected to grow by 2.6% in 2016 as a

whole. Additionally, residential investment remains strong, and is expected to

contribute 0.3pp to growth this year. However, the housing recovery continues

to be very gradual and tight inventory, especially in the new homes segment,

remains a constraint.

Business investment is depressed, growing only 1.5% y/y in Q4 2015. Most

forward-looking indicators point to a subdued trend through the remainder of

the year with growth averaging 1.3% in 2016. Exports remain feeble but import

growth is constrained by well-provisioned inventories. This in conjunction with

more subdued consumer spending momentum in Q1, means we have cut our

2016 GDP growth forecast 0.1pp to 2.0%, and expect growth of 2.4% in 2017.

Inflation rebounded strongly between September and January, but we foresee

it subsiding modestly over the summer on weaker base effects. We see annual

headline PCE and core PCE inflation at 1.1% and 1.8% this year.

In light of the Fed’s relatively cautious stance and our reserved growth and

inflation outlook, we expect the Fed will hold off until September before raising

interest rates. We see another rate hike in December, followed by three more in

2017.


45

8.5 JAPAN

The latest data suggest that the economy remained weak in Q1 but has likely

avoided overall contraction and therefore recession. Consumer spending

appears to have staged a modest revival while goods exports are holding up so

far. Much depends on business investment where there is no advanced data.

But it is worth noting that the latest Tankan survey reported expectations of a

fall in profits and weak investment intentions for fiscal 2016.

The strength of the yen is now a worry with the Finance Minister expressing

concern about the currency, but direct intervention to reduce the value of the

yen is not likely ahead of a G7 summit in Tokyo at the end of May.

The Bank of Japan is likely to ease policy again soon, possibly as soon as the

next policy meeting concluding on 29th April. We expect a 10bp cut in the

deposit rate to -0.2%. Inflation expectations are falling on all measures

(consumer and business surveys, financial markets and economists’ forecasts)

and are lower now than before the BoJ negative interest rate announcement in

January. This adds to the risk of a return to deflation, already present with

negligible economic growth and zero actual inflation.

Action on fiscal policy is also probable with an additional boost expected to be

announced before the summer and before elections to the upper house of the

Diet. Extra spending is likely to be concentrated on the household sector in an

attempt to boost consumption ahead of the scheduled consumption tax

increase in April 2017. That rise, from 8% to 10%, is still our baseline,

especially after recent comments by Prime Minister Abe reaffirming the

intention to go ahead. But it may still be in jeopardy if both the economy and

consumption are very weak in coming months.

We retain our GDP forecasts for 2016 at 0.5% and for 2017 at 0.3% (assuming

consumption tax increase). Our forecast for near-zero CPI inflation in 2016 is

now the consensus and also remains. The strength of the yen means the yen-

US dollar profile has changed but we still have a depreciation to ¥117 by year-

end.

-3

-2

-1

0

1

2

3

Feb-06 Feb-08 Feb-10 Feb-12 Feb-14 Feb-16

CPI exc fresh food

CPI exc fresh food and energy


Inflation

%

2% inflation target


46

8.6 EMERGING MARKETS

CHINA GROWTH UPGRADED; POLICY FEEDS THROUGH

There are increasing signs that the fiscal stimulus and improvement in property

construction are feeding through to boost overall economic activity. Moreover,

the official manufacturing PMI rose above 50 for the first time in eight months in

March, driven by stronger output and new orders.

As a result, we have revised our forecast for GDP growth this year to 6.5%

from 6.2% previously. This also ties in with the stronger emphasis policymakers

appeared to place on meeting the 6.5-7% target for 2016 growth at the National

Peoples’ Congress in early March. The Government Work Report presented by

Premier Li stressed that the aim to double GDP and per capita income by 2020,

set in 2010, calls for average growth of at least 6.5% in 2016-20. We have also

raised our forecast for 2017 growth to 6.2% from 6% last month.

We no longer expect the PBoC to cut benchmark interest rates further this year

(previously we had two 25bp rate cuts in the baseline). There are a few

reasons. The recent stimulus is already taking effect. Also, given that deposit

rates are already very low at 1.5%, a further fall would drive real interest rates

further into negative territory – something the PBoC traditionally likes to avoid.

And a further narrowing of interest rate differentials would put the currency

under more pressure.

Instead, we see the PBoC continuing to use open market operations and

cutting the reserve requirement ratio further to keep liquidity ample, encourage

more bank lending and keep interbank rates low and stable. The target for

credit growth this year is 13% (up from a 12% target in 2015); including the

bond issuance of provinces it is 16%. Thus, concerns about China’s rising debt

notwithstanding, policymakers are not targeting deleveraging this year.

35

40

45

50

55

60

2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016

Official PMI

Caixin PMI

China: Manufacturing PMI50 = expansion / contraction line

Source: China Federation of Logistics and Purchasing / Markit


47

THREE YEARS OF RECESSION FOR FRAGILE BRAZIL

Hit by lower oil prices, Mexico has announced a sizeable cut to spending worth

0.7% of GDP to take place in 2016 and 2017, dampening GDP growth.

Moreover, we do not rule out the possibility of more cuts in coming quarters. In

Brazil, the vote of President Rousseff’s impeachment in the lower house is

scheduled for 17th April, and it is hard to say whether or not her weakened

ruling coalition will manage to secure one third of the votes required to keep her

in power.

Meanwhile, markets rallied on the expectation of a political change, taking the

real to levels last seen before the ratings downgrade in September. On the

activity front, it remains business as usual with all the leading indicators

pointing to a weak start to the year. We now expect GDP to contract by 4.4%

this year. The slightly stronger real, coupled with weaker activity and a sharper

labour market deterioration, should marginally help to ease inflation.

-2

-1

0

1

2

3

4

5

6

7

8

9

2000 2003 2006 2009 2012 2015 2018

% year

Inflation

3 month interbank rate


China: Monetary conditions

F'cast

1 year lending rate

-28

-21

-14

-7

0

7

14

21

28

35

-12

-9

-6

-3

0

3

6

9

12

15

1997 1999 2001 2003 2005 2007 2009 2011 2013 2015

% year

US non-oil import volumes (RHS)

Source: Haver Analytics

Mexican GDP & US non-oil import volumes% year

Mexican monthly GDP proxy (LHS)


48

NO FISCAL OR MONETARY POLICY SPACE IN RUSSIA

Russia’s short-term economic outlook remains bleak. Indeed, despite lower

inflation and the strengthening rouble, the Central Bank of Russia kept interest

rates on hold at the March policy meeting, citing concern over the fragility of the

oil price rally and the risks to inflation from the uncertain budget policy.

Although Russia has large fiscal buffers and ample borrowing capacity, a

tighter fiscal stance will still be required to contain a widening budget deficit,

which we estimate will reach 4.6% of GDP in 2016, further weighing on growth.

TURKEY SURPRISED IN 2015, BUT OUTLOOK FRAGILE

Turkey grew by 4% in 2015, defying political turbulence and beating

expectations to become one of the fastest-growing emerging markets last year.

Private consumption remained resilient to the domestic uncertainty and public

spending was very strong. But we do not expect the outperformance to persist

in 2016; rather, we expect growth to moderate to 3.3% this year. At the final

MPC meeting of his term in office, Central Bank of the Republic of Turkey

governor Basci unexpectedly cut the overnight lending rate by 25bp to 10.5%,

taking advantage of the recent lira rally, but kept the one-week repo rate steady

at 7.5%. We now think that the latter will be held throughout this year.

-8

-6

-4

-2

0

2

4

6

8

10

2005 2007 2009 2011 2013 2015 2017 2019

December baseline

Lower oil price forecast


Russia: Lower oil price widens deficit

% GDP

Forecast


49

INDIA CUTS RATES, BUT RISKS STILL TO DOWNSIDE

Having maintained policy on hold since September the Reserve Bank of India

(RBI) cut interest rates at its April meeting. However, this was largely

anticipated. The key focus of the meeting was on strengthening the monetary

policy transmission mechanism. To this end, the RBI announced several

measures (including a narrower interest rate corridor) and indicated a shift in its

liquidity management framework towards a more neutral setting as compared

to the current practice of maintaining a deficit. We think this is a significant

development and should ensure speedier transmission of policy easing to the

real economy. We do not rule out the possibility of further easing later in the

year but we await more clarity on the trajectory of inflation (given the

approaching monsoon) and the fiscal consolidation path. With modest fiscal

consolidation likely to be offset by modest easing in monetary policy, we have

left our 2016 and 2017 annual GDP growth forecasts unchanged at 7.4% and

7.2% but the risks to our forecast remain to the downside.

-6

-4

-2

0

2

4

6

8

10

12

14

2004 2006 2008 2010 2012 2014 2016

% year

Repo rate


India: Interest rates and wholesale prices

Mumbai 3-month offered rate

Wholesale prices (WPI) inflation


50

9. APPENDIX 1

GLOSSARY OF COMMONLY USED TERMS AND ABBREVIATIONS

Airline industry indicators

ASK – Available Seat Kilometers. Indicator of airline supply, available seats x kilometers flown;

PLF – Passenger Load Factor. Indicator of airline capacity. Equal to revenue passenger

kilometers (RPK) / available seat kilometers (ASK);

RPK – Revenue Passenger Kilometers. Indicator of airline demand, paying passenger x

kilometers flown;

3mth mav – Three month moving average.

Hotel industry indicators

ADR – Average Daily Rate. Indicator of hotel room pricing, equal to hotel room revenue /

rooms sold in a given period;

Occ – Occupancy Rate. Indicator of hotel performance, equal to the number of hotel rooms

sold / room supply;

RevPAR – Revenue per Available Room. Indicator of hotel performance, equal to hotel room

revenue / rooms available in a given period.

Central Banks

BoE – Bank of England;

MPC – Monetary Policy Committee of BoE;

BoJ – Bank of Japan;

ECB – European Central Bank;

Fed – Federal Reserve (US);

RBI – Reserve Bank of India;

OBR – Office for Budget Responsibility;

PBoC – People’s Bank of China.

Economic indicators and terms

BP – Basis Point. A unit equal to one hundredth of a percentage point;

Broad money – Key indicator of money supply and liquidity including currency holdings as

well as bank deposits that can easily be converted to cash;


51

CPI – Consumer Price Index. Measure of price inflation for consumer goods;

FDI – Foreign Direct Investment. Investment form one country into another, usually by

companies rather than governments;

GDP – Gross Domestic Product. The value of goods and services produced in a given

economy;

LCU – Local Currency Unit. The national unit of currency of a given country, e.g., pound, euro,

etc.;

PMI – Purchasing Managers’ Index. Indicator of producers’ sentiment and the direction of the

economy;

PPI – Purchase Price Index. Measure of inflation of input prices to producers of goods and

services;

PPP – Purchasing Power Parity. An implicit exchange rate which equalises the price of

identical goods and services in different countries so they can be expressed with a common

price;

QE – Quantitive Easing. Expansionary monetary policy pursued by central banks involving

asset purchases to reduce bond yields and increase liquidity in capital markets;

G7 – Group of seven industrialised countries comprising the United States, the United

Kingdom, France, Germany, Italy, Canada, and Japan.


52

10. APPENDIX 2

ETC MEMBER ORGANISATIONS

Austria – Austrian National Tourist Office (ANTO)

Belgium: Flanders – Tourism Flanders

Wallonia – Wallonie-Bruxelles Tourisme (WBT)

Bulgaria – Bulgarian Ministry of Tourism

Croatia – Croatian National Tourist Board (CNTB)

Cyprus – Cyprus Tourism Organisation (CTO)

Czech Republic – CzechTourism

Denmark – VisitDenmark

Estonia – Estonian Tourist Board - Enterprise Estonia

Finland – Visit Finland – Finpro ry

Germany – German National Tourist Board (GNTB)

Greece – Greek National Tourism Organisation (GNTO)

Hungary – Hungarian Tourism Ltd.

Iceland – Icelandic Tourist Board

Ireland – Fáilte Ireland and Tourism Ireland Ltd.

Italy – Italian Government Tourist Board

Latvia – Latvian Tourism Development Agency (TAVA)

Lithuania – Lithuanian State Department of Tourism

Luxembourg – Luxembourg for Tourism (LFT)

Malta – Malta Tourism Authority (MTA)

Monaco – Monaco Government Tourist and Convention Office (DTC)

Montenegro – National Tourism Organisation of Montenegro

Norway – Innovation Norway

Poland – Polish Tourist Organisation (PTO)

Portugal – Turismo de Portugal, I.P.

Romania – Romanian National Authority for Tourism

San Marino – State Office for Tourism

Serbia – National Tourism Organisation of Serbia (NTOS)

Slovakia – Slovak Tourist Board

Slovenia – Slovenian Tourist Board

Spain – Turespaña - Instituto de Turismo de España

Switzerland – Switzerland Tourism

Turkey – Ministry of Culture and Tourism

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